On August 10, the US Senate passed a bipartisan infrastructure bill called the Invest in America Act. The bill passed with all 50 Democrats joined by 19 Republicans. The cost: one trillion dollars. On the same day, the Democrats voted to move forward debating a $3.5 trillion budget proposal.
The political process
While the infrastructure bill passed the more difficult hurdle of the Senate — where Democrats needed at least 10 Republicans to pass the bill — the bill must still pass in the House of Representatives where the Democrats enjoy a slim majority of only a few votes. If passed by the House of Representatives, the bill would be sent to President Biden, and once signed by him, become law.
In all likelihood, the bill will pass the House of Representatives, but not without a fight. The more progressive members of the Democratic Party will demand that the bill include more of their priorities related to climate change. More moderate members of the party, specifically those in swing districts facing a tough re-election battle in 2022, will fight to make sure that the bill has more infrastructure priorities and less spending which will be attacked by opponents as wasteful and unnecessary.
Speaker of the House, Democratic Congresswoman Nancy Pelosi has said she will not take up the infrastructure bill by itself. Instead, she will only take it up alongside the $3.5 trillion budget proposal. Echoing Pelosi were Democratic members of Congress Mondaire Jones and Alexandria Ocasio-Cortez. Progressives fear that if an infrastructure bill is voted on by itself, they will lose leverage for passing some of their other spending priorities. While the infrastructure bill had unanimous support from Democrats in the Senate, it is likely that the current budget proposal will face opposition from Democratic Senators Manchin and Sinema both hailing from Republican-leaning states.
Spending like never before
The bill passed in the Senate was a one trillion dollar bill. The sheer size of this bill in terms of money is unprecedented. Of the one trillion dollars, $550 billion alone is in new spending. For perspective, the last major infrastructure bill that was passed in Congress occurred during President Obama’s second term. The bipartisan bill Obama signed in 2015 was for $305 billion over the course of five years.
President Obama had sent a $478 billion proposal to Congress, but with Republicans in control of both Houses of Congress then, the President had little choice but to accept the veto-proof bill which he received.
The previous long-term infrastructure bill was signed in 2005 during the Bush Administration. The “Improvement Highway Safety for America” Bill was for $286 billion, considered a high number at the time. It was $30 billion more than the President had proposed.
Industries to receive a boost from the bill
Many industries stand to benefit from this massive spending bill. A bill meant to boost construction could have positive impacts on steel producers and other goods needed for construction purposes. Businesses that provide construction services to the government would also receive a boost from the many projects to be implemented through this bill.
Beyond that, there are many specific industries which see increased spending and subsidies flowing their way.
Electric Vehicles
The bill allocates $7.5 billion to build a network of electric vehicle chargers across the US. These electrical charging stations would be placed along highways, within communities and in rural areas. Another $2.5 billion is included to purchase zero-emission school buses. The bill adds another $200 million annually between 2022–2026 for R&D programs at the Department of Energy relating to EV battery recycling and second-life applications.
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Broadband across America
The bill also includes $65 billion dollars for broadband with the goal of ensuring that every American has access to high-speed Internet. It also requires companies receiving Federal subsidies to offer low-cost Internet plans to ensure that all Americans will be able to afford some type of plan.
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The bill also includes $39 billion to upgrade public transit systems, $25 billion for airports and $17 billion to upgrade ports. The legislation allocates $110 billion to repair the nation’s highways and bridges. In addition, $66 billion would be put towards improving the major Northeast corridor rail route as well as other routes across the US.
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The bill would also include $50 billion in climate resilience funding which would address issues relating to climate change. Critics, however, say that the bill does not address the issue of dependence on fossil fuels and in the area of renewables, fails to bolster solar and wind energy.
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Bill could boost inflation
According to the Congressional Budget Office, the infrastructure bill would add $256 billion to the US deficit over the course of 10 years, and the projected national debt is expected to reach $35 trillion by the end of the year. The US GDP in 2019 was approximately $21.5 trillion.
Many regulations in the bill would be a force for inflation. For example, new cars would need breathalyser and eye-tracking technology to prevent drunk driving. There would be technological devices built into cars to ensure children are not accidentally left in vehicles. There would be additional safety regulations to prevent automobile accidents. The Transportation Department would also update its regulations on car seats, headlights, bumpers, hoods and more.
Other economists have argued that “a well-structured infrastructure bill would boost the supply side of the economy, reducing inflationary pressures.” The improvements made to the infrastructure, they claim, would drive down business operation costs and, in turn, consumer prices.
Looking to the future
The infrastructure bill needed bipartisan support in the Senate in order to pass. That hurdle has been passed. Despite the Democrats’ narrow majority in the House, the infrastructure bill would likely pass. The remaining question is whether House Democrats will stick to their demand of taking up the infrastructure bill along with a budget proposal. That could potentially derail the bill as some Senate Democrats are wary of the $3.5 trillion budget proposal.
That issue notwithstanding, many sectors in the economy stand to benefit from subsidies, grants and other projects which will come out of the infrastructure bill. How this will play out in the market remains to be seen. One thing, however, is certain. There stands to be a lot of building in the United States.